Latin America and the Caribbean
(LAC) are passing through a deep process of devolution during the last
quarter century of the 20th century. LAC experienced the restoration
of pre-national forms of property ownership, the reversal of social
relations of production (capital-labor). Forms of primitive accumulation,
characterized by forcible seizure of urban and rural land and massive
population displacement by the state and in some cases by paramilitary
elites have been re-introduced.

Modern information systems,
expanding world markets, large-scale, long-term mergers and acquisition
leading to unprecedented levels of centralization and concentration
of capital are combined, articulated and facilitated by the restoration
of pre-national policies and structures.

The socio-economic and political
consequences of this combined and uneven development are the deepening
of class inequalities, a growing mass of uprooted, semi-urbanized peasants
and workers, and the integration of a new super-rich LAC bourgeoisie
into US-EU-Asian imperial circuits. The emergence of pre-national and
externally controlled capitalism throughout Latin America has led to
a massive increase in class and national conflicts, at a variety of
socio-economic sites, involving a broad array of social strata, utilizing
unorthodox strategies.

The social struggles reflect
efforts to counter the socio-economic reverses and pre-national, primitive
forms of exploitation as well as the modern forms of technological exploitation.
Vague exhortations by the Left and Right to resist or defend ‘globalization’
or ‘neo-liberalism’ overlook the historical merger of the
past, present and emerging forms of capitalist organizations. To ‘re-think
the development’ of LAC for the 21st century requires that we
understand the process and structures which configure the region.

Restoration and Reversals

The last 25 years have witnessed
the dismantling of the entire economic structure, which characterized
the construction of the LAC nation-state and the reversion to a pre-national
economy. From the end of the nineteenth century, but especially 1930-1975,
LAC created a national economy and state: large-scale mostly public
investments in national industries, infrastructure, higher education,
literacy, public health, local markets, and credit and financial institutions
created the material basis for the modern nation-state. The state in
different moments and places nationalized strategic sectors, like natural
resources, petroleum, iron, copper, tin, land and maritime transport
and public utilities (telecommunications, water, power and light). Foreign
capital was not absent – but in most cases was regulated to complement,
not displace, national capital – as was the case with the normal
development pattern of the US, Europe and Japan. Large-scale foreign
capital was denied majority share ownership in many sectors; assembly
plants were obligated to fulfill ‘national content’ rules;
land ownership was restricted or denied in some countries. Profit remittances
were regulated as was borrowing from local banks. In other words, Latin
America moved from being a pre-national praetorian state linked to foreign-dominated
export enclaves to a nation-state capable of funding and developing
the social infrastructures of a modern society.

Beginning with a series of
historical political defeats in the mid 1970s and continuing to the
present day (2007), the entire social-economic architecture of the modern
national economy and state was demolished and the pre-national political
economy was restored.

Under the slogans of privatization,
free markets and de-regulation, the restorationist regimes reconverted
their economies to foreign-owned export-oriented enclaves. The process
of devolution usually involved a two step process: privatized state
enterprises were sold to local private elites with political ties to
the regime, who either re-sold the productive facilities to foreign
investors and conglomerates (acquisitions) or became lesser partners
(mergers with multinational corporations).

Privatizations were accompanied
by the pillage of natural resources and the violent seizure of rural
and urban land – either through state policies, bogus land claims,
utilizing ‘market mechanisms’ enforced by the military,
or via counter-insurgency and paramilitary death squads which dispossessed
millions of small farmers and peasants (Colombia). Counter-insurgency
programs while supposedly motivated by political claims served to re-concentrate
land-ownership in the hands of big agro-export elites linked to the
pre-national regime and model.

The re-introduction of pre-national
structures and policies took place in the context of relatively defined
urban-industrial class structure with publicly-funded social programs
(unlike the 19th century version). The re-introduction of the colonial
model caused immense damage to the entire fabric of society –
converting modern workers into contingent workers, forcing skilled workers
to flee the country to modern nations or imperial states overseas. Rural
to urban migration was not accompanied by industrialization but by de-industrialization.
In other words, what is called ‘neo-liberalism’ is the forcible
political restoration of earlier forms of capitalist exploitation (uprooting
local economic networks, undermining the national markets and the formation
of skilled wage workers and a professional class).

The clearest expression of
the pre-national restorationist nature of contemporary regimes is the
expansion of private education and health services creating enclaves
of privilege, which ensures the reproduction of a rigid class structure
characteristic of earlier agro-mineral export societies.

Moreover, the general assault
on public sector employees, their salaries, employment and pensions
is an essential part of substituting pre-national private paternalistic
‘charity’ and ‘voluntarism’ for professional
public services.

The reversion to private
services dependent on the ‘good will’ of wealthy benefactors
in place of public obligations in meeting basic citizen needs is accompanied
by the public usurpation of private space for a new predatory sector
of capitalism. The most lucrative, dynamic sector of capital is found
among real estate capitalists, intimately linked to financial institutions,
construction companies and the state. Real estate investment is the
most profitable sector on a world scale; drawing on the support of the
state via easy credit, low interest, high liquidity and favorable land
use regulations. A study of the new rich multi-billionaires in Latin
America, Russia, China and India demonstrate that real estate profits
were a key factor converting millionaires into billionaires.

The Role of the State
in the Restoration of the Pre-National Economy

As under earlier pre-national
capitalism, contemporary real estate capitalism relies on property and
land rents and speculative valuations, not profits based on production
of goods and services. The state plays a key role in the expansion of
real estate capital, by seizing high value rural and urban property
owned by poor rural and city dwellers and transferring it to wealthy
elites. In other words, political force, the methods of early capitalism
(‘primitive accumulation’) displaces masses and allows real
estate and other forms of capital – such as agro-business –
to exploit the land.

The rentier state provides
export subsidies and tax abatements, as well as large-scale investments
in infrastructure, which links the new business, commercial, apartment
complexes to domestic and overseas markets and employment.

The rentier, pre-national
state does not ‘de-regulate-, ‘shrink’ or ‘withdraw’.
It established new regulations giving primacy to foreign investors and
eliminates regulations promoting national public enterprises and social
programs. The state expands its police and repressive apparatus and
its intervention in civil society and reduces the number and quality
of social services. The state actively intervenes to co-opt civil associations
and non-governmental organizations (sic) (NGOs), while eliminating agencies
protecting the environment, health and occupational safety, indigenous
populations and children.

New Class Structure:
The Four Tiers

The massive large-scale re-entry of foreign capital into strategic sectors
of the national economy epitomizes the reversion to a pre-national economy
or more precisely a colonial entity – albeit with vastly different
economic, class and political institutions and organizations. Unlike
the earlier colonial period, based exclusively on agro-mineral exports,
contemporary re-colonization penetrates all sectors, primary, secondary
and tertiary. Large-scale multinational corporations rely on advanced
information technology and a variety of new financial instruments to
extract rents, profits, royalties and speculative windfalls and to transfer
wealth to several thousand billionaires in the imperial centers and
colonized capitals of the world.

The imperial system has four
inter-related levels of exploitation. On the bottom tier the new imperial
architecture rests on foundations of labor power, productive resources
exploited and extracted from Latin America, Asia and Africa. At the
next level, manufacturers and agro-mineral capitalists extract profits
from the exploitation of labor and natural resources. At the third tier,
real estate, commercial, banking and IT capitalists extract interests,
rents and royalties. At the top of the imperial pyramid are the investment,
pension, hedge and derivative funds, which profit from buying and selling,
merging and acquiring multinational corporations and speculate in the
speculators paper value. The four-tiered hierarchy defines the architecture
of contemporary Latin American development in the 21st century.

At each level the value produced
at the lower levels is transferred to a higher level leading to an inverted
pyramid of wealth: the top .01% of the super rich own more assets than
the bottom 50%. To speak of the ‘capitalist class’ without
clarifying its location in the imperial architecture is to obfuscate
the new configuration of imperial power. The links between the different
levels of the class structure are powerful because of inter-sectoral
investment and their common interest in the exploitation labor and natural
resources. There are no progressive bourgeois even as conflicts exist
between the latter and the more powerful sectors of capitalists above
them.

Latin America, in its current
pre-national devolution, rests on highly predatory practices of capital
accumulation based on political and economic mechanisms. The new relationships
between the state and economy, began with the destructions of the national
state and the restoration of colonial structures, grafted upon modern
labor force, national institutions and social consciousness. The construction
and expansion of the new financial-real estate-extractive centered economy
highly depends on political control. The new economies are not self-sustaining
via purely market mechanisms and they face numerous powerful class adversaries
who have been profoundly alienated.

Contradictions and Transformation
of the Pre-national State
Reversion and restoration to a pre-national regime and economic structure
has created a multiplicity of enemies and vulnerabilities which can
lead to profound transformations.

The changes are recent, brutal
and swift, but the ideology justifying them has failed to gain hegemony
among the great majority, even as most changes of electoral regimes
have failed to undertake a new project. Secondly the deepening inequalities,
the concentration and centralization of capital evidenced by the massive
growth of mergers and acquisitions (M&A) and the multi-billion dollar
income of the super-rich has created highly polarized societies. Thirdly,
M&As have integrated the economies and socialized production, even
as private profits have grown, deepening the contradictions between
private ownership and social production. Fourthly, the concentration
of wealth into the financial, insurance and real estate, speculative
sectors, adds to the vulnerability of the entire imperial edifice. Finance
and real estate, collecting rents and interest without producing value,
is the most parasitical sector, divorced from the direct production
of goods and services is subject to the greatest volatility and risk
of economic crisis.

Fifthly, the long-term, large-scale
boom in manufacturing in China, East and Southwest Asia has led to record
breaking international prices for base metals (copper, lead, tin, nickel
and zinc), agricultural products (soya, wheat and sugar) and energy
products (gas, petroleum and ethanol) generating. This has led to enormous
profits for the export elites and a great increase in revenues for governments
in Latin America.

The ‘crisis’
in Latin America today is not the ‘stagnation’ of capitalism,
but growth based on intensified exploitation of labor and the concentration
of income and revenue in the ruling class and its political elite. Never
in recent history has so much wealth been accumulated in Latin America
and never has the ruling class allocated so much wealth for conspicuous
consumption, overseas investment and speculation in real estate. Never
has Latin American seen the growth of so many multi-millionaires and
the transformation of millionaires into billionaires as has occurred
over the past decade, despite the ‘crisis’ of the late 1990’s.

The combination of privatization,
pillage and mergers of the 1990’s and the astronomical world prices
of the past 7 years has created enormous budget surpluses and massive
private fortunes.

These changes in the structure
of capitalism have created the objective basis for large-scale, long-term
popular mobilization and class conflict. All the basic economic ingredients
for a structural transformation are present today as never before. Several
strategic changes are necessary and feasible. The key is the re-nationalization
of the most dynamic lucrative financial and agro-mineral export sectors
– which will allow the financing of a diversified manufacturing
sector, large-scale food production in highly mechanized farms and major
public investments in re-building social services.

The second necessary and
feasible reform is the public takeover of the dynamic foreign trade
sector, which generates the biggest profits, and is the greatest source
of public revenue for long-term investment. Export-oriented development
is obviously a growth engine for social development - especially in
the epoch of rising international prices — if the state is directed
by the popular classes. The real questions are what social classes direct
and control the state and dispose of the profits and how are they invested
in the domestic market? Export income equitably distributed among the
direct producers, rationally invested between export and domestic market
sectors and capital controls can become the vehicle for financing a
social transformation.

Popular rural and urban re-development
requires the reversion of land-ownership from agro-business elites,
speculators and real estate developers to public sector agronomists
allied to peasants and urban planners allied to low-income city dwellers.
The reversion of illegally seized lands requires fundamental changes
in the state, property law and especially the judiciary. Luxury offices
and apartments can be re-converted into public facilities for social
services, cultural activities and low-rent housing. Large-scale plantations
resulting from violent, illegal or arbitrary displacement of farmers
and peasants can be converted into public-peasant-rural worker profit-making
enterprises.

The Modern Paradox:
Capitalist Concentration and Popular Socialization

The paradox of the current unjust economic system is that it has created
all the necessary conditions for a social transformation, properly understood.
Mergers and acquisitions have narrowed the economic bases of the ruling
class. The growth of speculative capital has undermined all paternalistic
and hegemonic forms of exploitation by which capitalists manipulate
workers or peasants’ consciousness. The growth of great fortunes
has further distanced the super-rich from the great mass of people,
ending any mass illusions of ‘rags to riches’. The rationalization
of the economy based on the introduction of new technology facilitates
the flow of information for public planning. The growth of a multiplicity
of new markets and their demands for strategic goods undercut imperial
blockades and boycotts.

In historical perspective,
current development strategists benefit from the negative lessons of
experiences with neo-liberal capitalism and bureaucratic collectivism.
Privatization concentrates profits, finances real estate speculation
and overseas flight of capital. The unequal returns on investment idles
enormous amounts of labor power and drives millions of modern skilled
workers and professionals out of the country.

Bureaucratic collectivism
failed to adequately manage a balance between production of capital
goods and private consumption, collective work discipline and productivity.
Arbitrary political structures encouraged passivity and discouraged
innovation.

Re-thinking Latin
American Development in Light of the Bolivarian Experience

The promise and the contradictions
of the Venezuelan Bolivarian experience provides additional experiences
and lessons for re-thinking development in Latin America and the Caribbean
despite differing resource endowments and historical-cultural idiosyncrasies.

Specific features also suggest
we proceed with some caution. In addition, while deep changes have taken
place in Venezuela, they are not fully consolidated. However we can
mark out several important lessons that contribute to our re-thinking
of recent ‘center-left’ dogmas.

Let us summarize the contribution
of the Bolivarian process (BP) to opening the development debate.

First the BP has demonstrated
that privatized property can be re-nationalized successfully. Privatization
is not ‘irreversible’, nor is it the ‘only’
direction for economic development. Secondly large-scale insertion in
the international economy is not incompatible with the creation of advanced
social welfare programs and public enterprises. In other words ‘globalization’
does not ‘require’ all the paraphernalia of a neo-liberal
economy. Insertion and participation in the international economy is
compatible with a variety of mixes of public and private property, more
equitable income distribution patterns, and increasing public and private
consumption.

Thirdly the BP demonstrates
that windfall profits from the high prices of primary commodities need
not lead to wealthy enclaves in a sea of poverty. In Venezuela, the
government controls trade revenues and re-allocates funds toward the
popular classes in the form of massive educational, health and subsidized
food programs.

Finally the BP demonstrates
that a consequential nationalist-welfare President can come to office
via elections, but can only continue in power thanks to massive popular
mobilizations and support from sectors of the military. President Chavez’
electoral victory was severely tested by a US-backed military coup (April
2002), a bosses’ lockout (December 2002-February 2003), paralyzing
and sabotaging the oil industry and a US-funded referendum. In each
case, the electoral process survived because of the massive intervention
of extra-parliamentary action: one million urban slum dwellers marched
against the coup-makers; a majority sector of petroleum workers and
a minority of technicians re-started the petroleum industry; the overwhelming
majority of the popular classes mobilized, organized and defeated the
referendum. The BP demonstrates that electoral politics under some circumstances
can open important openings for political change but requires independent
mass direct action to defend the process, sustain the regime and defend
strategic nationalized industries.

Equally the BP demonstrates
the need for profound structural changes in the nature of the state
apparatus. Important sectors of the Venezuelan military and judiciary
intervened against the process of structural change. The existing civil
and diplomatic bureaucracy, largely put in office by previous neo-colonial
regimes, fails to implement social programs, sabotage the processing
of budget allocations, and delays ad infinitum the agrarian reform,
housing programs, while continuing corrupt practices and bribery.

The new reality of Latin
America with its flourishing export economies and highly polarized class
structure, its pre-national regimes and modern information systems suggests
that social movements and political parties have every advantage in
challenging the existing regime. The focus of the opposition popular
movements on the colonial regimes’ distributive politics facilitates
politicizing each and every economic demand. This is inevitable because
the state plays a decisive role in maximizing earnings of the export
sector and denying the allocations of resources to the social service
workers in the public sector.

Today, more than at any time
in the past, the pre-national export regimes living on rents, royalties
and revenues from colonial economic activity are politically vulnerable.
The massive shift of public revenues from public investment and social
services to private foreign and domestic capital is accompanied by major
cutbacks in salaries and pensions for public employees, creating militant
concentrated urban classes facing downward mobility. The expansion of
multinational corporations into retail trade — shopping malls
— has driven urban retailers into bankruptcy. The expansion of
‘free trade zones’ and contract labor has undermined social
legislation and security for the urban industrial working class. These
are not merely temporary ‘sectoral’ economic problems, they
are national political problems, which centers on the centrality of
the state and state power.

Conclusion: Instruments
of Socio-Economic Change: Electoral Processes and Social Power

To the extent that electoral processes change the composition of the
state apparatus and its orientation they can be useful. Merely ‘grafting’
onto the state newly-elected officials results in the continuation of
the old order. No progressive electoral movement can come to power unless
it is the product of intensive class and national struggles, which raise
consciousness and create mass extra-parliamentary organizations capable
of sustaining the newly elected regime against inevitable post-election
coups and sabotage. In most cases the key to political power is not
the questions of elections but organizing social and political power
outside of the established institutional channels to guarantee a continuous
process of transformation.

Organized social power is
necessary because even public ownership can hide new class inequalities,
which perpetuate injustice and alienation. Moreover public investment
decisions, allocation of trade surpluses and the balance between capital
consumption and public/private consumption requires the participation
of direct producers and mass consumers.

As a reference point Venezuela
provides some useful lessons but no one should construct a model based
on the BP, even less so on the practices of the ‘center-left’
regimes in Latin America. For one thing, Venezuela has been and continues
to be a rentier economy despite President Chavez’ efforts to transform
it. Secondly, none of the self-styled ‘center-left’ regimes
(Lula in Brazil, the Kirchner family in Argentina, Evo Morales in Bolivia
and Vazquez-Astori in Uruguay) has broken with the elitist agro-mineral
export model, reversed the privatized strategic economic sectors. In
fact, Kirchner has renewed one of the most regressive mining laws in
the entire hemisphere with royalty payments to the state not exceeding
2%, and Evo Morales handing over the iron-magnesium Mutun Complex to
the Indian multi-national cartel, Jindel, on exceedingly favorable (anti-national)
terms.

The lesson from 5 years experience
with the political economy of the ‘center left’ regimes
is that they are not ‘left’ or even ‘center’,
but are unequivocally part of a ‘third wave’ of neo-liberal
regimes, which came to power after the collapse and crisis of the second
wave (Menem-De la Rua, Sanchez de Lozado-Mesa, etc.) and have been favored
and sustained by the exceptional world prices and demand. The examples
of the failure of progressive structural reform under the new (ex-leftist)
neo-liberals teach us that past ideological labels, popular social origins
and anti-neo-liberal rhetoric is not a good indicator of current political-economic
practice, and social alliances in political power. The entire political
class defining itself as ‘center-left’ is composed of upwardly
mobile professionals, lower middle class social and political officials
and electorally oriented movement leaders. They use their past links
to the social struggle to gain political power, economic affluence and
social acceptance by the dominant classes and their foreign counterparts.
To avoid the repeated vicious circle of starting on the left with the
people, passing to the ‘center left’ with the middle class
and embracing the right and big business, the mass movements must exercise
direct democratic control over their leaders, close vigilance over their
social programs and the tactics and strategies of their leaders.

The structural transformations
( agrarian reform, nationalization and direct popular control) must
be mediated by the political circumstances, based on mass organized
popular movements and professional capacity to design, administer finance
and execute policy. Concrete programs that directly improve lives are
necessary to gain popular adherence to the process; but careful delineation
of the ‘rules of the game’ for different strategic allies
among small and medium property holders in services, manufacturing and
farming are central to isolating the financial, real estate and agro-mineral
elites. Fundamental to creating mass anti-colonial consciousness is
the creation of a new popular culture and recreation as alternatives
to colonial and pre-national mass media propaganda.

The specific transformative
packages of measures and the timing should be reflective of the specificities
of each country — but the immediate goal is to hasten the transition
from a pre-national to a national economy. This involves transforming
a speculative real estate market to a socially based public housing
program and a rent, interest, royalty and profit remittance economy
based, on overseas payments, to a self-financing, domestic market linking
local resources and regions. Export sector windfall profits should lead
to strengthening domestic production and exchanges which expand productive
sectors and local consumption based on egalitarian norms which equalize
popular political participation.

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